Connections to Florida

More Concerns With Ohio Charter Schools
Posted on 08/27/2018
Image of News Sign(Doug Livingston writing for Beacon Journal)

Ohio’s top public accountant is actively investigating the case of two businessmen accused of using charter schools to defraud Florida taxpayers, students and schools — and maybe here, too.

On Friday, Ohio Auditor Dave Yost acknowledged that a probe has been ongoing for a year. Meanwhile, court documents filed this month in Florida indicate 19 Ohio charter schools were overbilled nearly $600,000. Prosecutors and forensic accountants say the money was laundered through 150 bank accounts and shell companies then returned as “rebates” and “kickbacks” to Marcus May, who once ran more than 20 charter schools in Ohio.

In 2012, May used a parent company, Newpoint Education Partners LLC., to open Cambridge Education Group, a charter school operator based in Akron. To grow business in Florida, authorities say he “falsely represented” that his Ohio schools were well managed. By 2016, prosecutors say he allegedly defrauded Florida and its public schools of more than $1 million.

May has repeatedly declined to speak with the Beacon Journal.

The pattern in Florida seems to mirror transactions in Ohio.

One forensic document in the Florida case details how Ohio schools paid $1.1 million to Apex Learning, a Seattle-based company May used to bill the 19 Cambridge schools in Ohio and 15 Newpoint schools in Florida for online and hard-copy curriculum. Russ Edgar, the lead Florida prosecutor in the white collar criminal case against May, has produced invoices that show how Apex inflated pricing for furniture and computers to siphon $229,756.57 from Florida’s education system and $456,551.92 from Ohio schools, including four in Akron.

“After the allegations in Florida came to light, Marcus May was immediately relieved of any managerial duties and later of his equity in Cambridge,” John Stack, co-owner of Cambridge, said in a written statement. He said Cambridge hired a forensic accountant to find out if Apex negatively impacted any Ohio schools. Once the schools were identified, the money was returned.

Of the 18 Cambridge schools still open in Ohio, 13 signed new management contracts this summer with Oakmont Education. Stack founded the company with Marty Erbaugh, an investment banker from Hudson. Oakmont will take over Cambridge’s dropout recovery high schools for struggling teenagers and young adults.

“Oakmont doesn’t believe that any of the schools we manage were negatively affected by Marcus May’s actions or Cambridge’s management,” said Stack, who filed the paperwork to create Oakmont on March 20, four days after a Florida jury convicted one of May’s associates.

Ohio connection
Allegations of self-dealing surfaced in late 2016 when a Cleveland school managed by Cambridge questioned what May was doing with state funds. Boards at the other schools have stuck with Cambridge, or moved to Stack’s Oakmont, through the ordeal.

Prosecutors say bank records show that May spent public funds — some of it provided by parents for student uniforms and lunches — on exotic trips, jet skis, a mansion mortgage, plastic surgery and other personal effects. Court documents in Florida connect some of the money to Ohio land that houses the Cambridge headquarters at 481 N. Cleveland-Masillon Road, a title agency on South Main Street and charter schools in Cleveland and Columbus. The Beacon Journal checked with the Ohio Secretary of State’s Office to see who’s behind the companies that own these properties. The secretary’s office said there’s no documentation for them.

That’s part of the confusion in this complicated case of shell companies and sophisticated transactions. Investigators at it since May of 2016 have had trouble with even the basic details.

“We don’t really know where he lives,” Edgar told an Escambia County judge earlier this year when May was booked in the Escambia County Jail then released about three hours later after posting a $600,000 bond. His four-week jury trial begins Sept. 11.

A month earlier, May’s business associate, Steven Kunkemoeller, was found guilty in the racketeering and fraud case. Sentenced to 55 months in prison, Kunkemoeller is back in Cincinnati waiting for a Florida judge to say whether he can appeal his jury conviction.

The ‘kickback’
The alleged pilfering and laundering of public funds utilized companies created or controlled by May and his friends to overcharge charter schools for equipment. May and Kunkemoeller pocketed what the schools could have saved by shopping at an office supply store, according to prosecutors with access to bank, personal, business and school financial records.

A certified fraud examiner looked at 205 invoices and determined that Kunkemoeller’s School Warehouse Inc. upcharged the 19 Ohio charter schools by $590,644.73. Egregious examples include billing Towpath Trail High School on Market Street $114,730 for computers worth $58,337.30 at CDW — a 97 percent markup — or $4,637 in furniture for Colonial Preparatory Academy in Kenmore priced online for $420 from Hertz Furniture — a 1,004 percent markup.

Colonial Prep abruptly and suspiciously closed two months before the first day of class this year.

Unlike Florida where school districts oversee charter schools and, in this case, uncovered the alleged fraud, Colonial Prep is monitored by Charter School Specialists, a for-profit company hired by a private sponsor. Dave Cash, the company’s executive director, said Colonial Prep closed due to “insufficient academic performance.”

Regarding Yost’s investigation and the fate of the other 4,300 students at Cambridge schools last year, the network’s sponsors — Cash, Peggy Young of Buckeye Hope Community Foundation and J. Leonard Harding of Educational Resource Consultants of Ohio Inc. — all said they were unaware of an auditor’s investigation.

Over the past year, Yost has routinely reminded the Beacon Journal that his office has a policy of not commenting on ongoing investigations, though he did say May has been on his radar since about January 2017.

“We have an open investigation into this matter and have for more than a year,” Yost spokesman Benjamin Marrison said Friday. “A full-time investigator and auditor from our Public Integrity Assurance Team (PIAT) are actively working the case, one that is complex as it involves multiple entities.”

Yost formed the PIAT collaborative of 10 criminal investigators, nine forensic auditors, two attorneys, four managers and a clerk in early 2015 to take on complicated public fraud cases — all the way through from complaint to court judgement.

Marrison could not elaborate on if or when charges might be referred to authorities and filed in Ohio. “We cannot provide further information on the case as it is an ongoing investigation,” he said. “And divulging more information may jeopardize the investigation, which would not serve taxpayers.”
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